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Dear John,
Need some help please.
Q1, target selling price is 20p/u, target mark up is 1/3, estimated production cost 16p/u, what is the target cost gap?
Answer is 1.
The calculation is 3/4×20=15, then 16-15=1. However, where do I get the 3/4 from?Q2, selling price 200, the demand will be 100,000 units per annum. The demand will change by 10,000units for every 30 change in the s.p. Fixed cost is 60,000 per year and v/c 8 p/u. What s.p. Per unit will the profit maximised?
Answer is 254.
The calculation is p=500-0.003q, MR =500-0.006q. But where do I get the 500 from please?Thank you
Kim
Q1 If the markup is 1/3, then for every $3 cost, the profit will be $1 and the selling price will therefore be $4.
Putting it the other way round, for every $4 selling price the cost will be $3. Therefore the cost will always be 3/4 of the selling price.Q2 500 is the selling price at which the demand will be zero. It is 200 + (0.003 x 100,000)
I explain both these points, with examples, in my free lectures.
The lectures are a complete free course for Paper F5 and cover everything needed to be able to pass the exam well.
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